Will You Be Able to Afford the Cost of Home Repairs After a Natural Disaster?

According to recent government data, the frequency of natural disasters that cost over a billion dollars has increased over the past 40 years, rising from an average of only three to now thirteen occurrences per year. Not only are the number of natural disasters going up, but the average cost and death toll from each is rising as well.

If your home suffers damage during a hurricane, wildfire, earthquake, flood, or severe storm, it can be personally and financially devastating. Will you be able to cover repairs? Fortunately, disaster loan assistance and aid may help cover certain costs while you’re waiting on an insurance claim.

Here’s what to know about financial assistance after a natural disaster, how to apply, plus an alternative to consider if you need funding fast.

What Is Disaster Loan Assistance for Homeowners?

Disaster relief loans and aid are types of emergency funding issued by federal agencies after a government-declared natural disaster. Funding types differ and may include grants you don’t need to repay or low-interest disaster relief home loans you pay over a set term.

Examples of government-declared natural disasters include:

• Earthquakes

• Floods

• Fires

• Hurricanes

• Severe ice storms

• Snow

• Tornados

• Tropical storms

To qualify for a disaster loan, you’ll need to meet certain eligibility criteria and be located in a government-declared disaster area. Those who have insurance will need to provide information about their coverage, as your insurance benefits will help determine the amount of assistance you get. Those who aren’t insured can also apply for federal assistance.

How Can You Use Disaster Loan Assistance Funds?

Qualifying homeowners can use disaster loans or federal aid to offset rebuilding and repair costs that aren’t covered by their insurance company. These funds may also help pay for temporary housing or rent if your property is uninhabitable due to a covered event.

For instance, if your Florida home sustained severe wind damage during a hurricane and your homeowner's insurance will only pay for certain repairs, a disaster loan could help cover the remaining costs.

Types of Disaster Loan Assistance

Different programs are available for homeowners or renters seeking disaster loan assistance, including the following options:

Federal Emergency Management Agency (FEMA) Individual and Household Assistance

FEMA offers individual and household aid through its Individuals and Households Program (IHP). The IHP is a grant program, meaning you won’t need to repay any funds you receive if you qualify.

For those who meet certain eligibility criteria, IHP assistance can help cover temporary housing costs, as well as home repairs and personal property replacement costs not covered by your insurance.

• Learn more about FEMA IHP assistance

• Apply for FEMA IHP assistance

U.S. Small Business Administration (SBA) Disaster Assistance Loans

While you may assume the SBA only offers business loans, homeowners or renters seeking financial assistance after a declared disaster may also qualify for an SBA loan. The SBA currently offers low-interest loans of up to $200,000 for home repairs and $40,000 for personal property replacement. Insurance payouts will factor into how much you can borrow from the SBA, and SBA loans over $25,000 are generally secured by the property they’re used to repair.

As a homeowner, you might also qualify for a loan that’s 20% higher if you use funds to make home improvements that help mitigate the risk of future damage. In certain cases, the SBA may also refinance an existing mortgage if your primary residence has sustained serious damage your insurance company won’t cover. The SBA offers loan terms of up to 30 years, and current interest rates won’t exceed 4% for applicants unable to get other financial assistance or 8% for those able to get assistance elsewhere.

• Learn more about SBA disaster loans

• Apply for SBA disaster loans

Alternatives to Disaster Loan Assistance

If a disaster loan or federal aid doesn’t sound like the right option or doesn’t meet all of your needs, a personal loan for home upgrades and repairs may be worth considering. For example, after a disaster, you may find yourself underinsured or waiting a long time for an insurance payout or for federal assistance. Personal loans typically offer competitive, fixed interest rates, and you may be able to borrow amounts up to $40,000 (or more from certain lenders) if you qualify. Unlike some SBA loans, personal loans are often unsecured, meaning they don’t require your home or car as collateral. Loan funds may be disbursed within days, which means you can make urgent repairs quickly instead of waiting weeks or months to address them.

Make sure your home is properly insured.

Your home is most likely your biggest asset, which is why it’s critical you avoid being underinsured in the event of a disaster. Here are some important questions to ask your insurance professional before one occurs:

• Do I have enough of the right kind of coverage to rebuild my home at today’s costs?

• Would I be able to replace all of my possessions?

• Do I have enough coverage for living expenses if my home is inaccessible or being rebuilt?

FAQs About Disaster Loan Assistance for Homeowners

Can a homeowner apply for an SBA disaster assistance loan?

As a homeowner, you can apply for an SBA loan if your home is in a government-declared disaster area and you meet certain eligibility criteria. The SBA offers home repair and personal property replacement loans to qualifying homeowners impacted by natural disasters.

How much can you get from disaster loan assistance?

The amount you can borrow with an SBA loan depends in part on what your insurance company will cover. While qualifying homeowners can borrow up to $200,000 through the SBA, insurance payouts will usually be deducted from its damage estimates. For example, if your insurance will cover $50,000 in home repairs, you could only borrow a total of $150,000 with an SBA loan.

FEMA does not disclose its average aid amounts but typically will also account for insurance payouts before disbursing any funds.

How long will it take to get approved for a disaster loan?

The SBA states it tries to make loan decisions within 2-3 weeks of receiving an application. If approved, in some cases you could receive an initial loan disbursement of up to $25,000 in as little as five business days after closing on your loan.

FEMA doesn’t specify how long it takes to distribute IHP aid.

What if insurance won’t cover the cost of repairs or disaster loan assistance or aid is delayed?

If you’re underinsured or waiting on an insurance payout or federal assistance, a personal loan could be a good solution to tide you over. Personal loans are often unsecured (don’t require your home or car as collateral) and loan funds may be disbursed within days. This means you can make urgent repairs quickly instead of waiting weeks or months for disaster loans or aid to address them.

The Bottom Line

While natural disasters can be both personally and financially devastating, federal disaster loans or aid could help pay for home repairs your insurance won’t cover. However, you’ll need to meet strict requirements to qualify for federal assistance, and it can take a while for those funds to be disbursed. A personal loan for homeowners could be a good alternative for quickly covering repairs or losses that aren’t covered by your insurance policy or federal assistance.